Question 1

During the 1930s, those counties

Accepted Answer

A)  that abandoned the gold standard early in the Depression fared much worse than those that clung to gold. 
B)  that clung to their gold parities found themselves forced to raise interest rates and contract their money supplies in order to avoid large gold losses. 
C)  that abandoned the gold standard and fixed their exchange rates were able to avoid deflation. 
D)  that abandoned the gold standard and floated their exchange rates were not able to avoid deflation. 
A)  that abandoned the gold standard early in the Depression fared much worse than those that clung to gold. 
B)  that clung to their gold parities found themselves forced to raise interest rates and contract their money supplies in order to avoid large gold losses. 
C)  that abandoned the gold standard and fixed their exchange rates were able to avoid deflation. 
D)  that abandoned the gold standard and floated their exchange rates were not able to avoid deflation.

Question 2

The Bretton Woods system broke down in the early 1970s because of

Accepted Answer

A)  the Watergate scandal. 
B)  the increased price of oil. 
C)  an overvalued dollar. 
D)  an undervalued dollar. 
A)  the Watergate scandal. 
B)  the increased price of oil. 
C)  an overvalued dollar. 
D)  an undervalued dollar.

Question 3

Under a fixed exchange rate system with a low degree of capital mobility, the domestic interest rate is determined by the following formula

Accepted Answer

A)      
B)    
C)    
D)    
A)      
B)    
C)    
D)

Question 4

Mexico's peso crisis in 1994-95 was a surprise for each of the following reasons except

Accepted Answer

A)  the government's budget was balanced. 
B)  profits from investing in Mexico were low. 
C)  an outbreak of renewed inflation was not generally expected. 
D)  the government's willingness to raise interest rates was not in question. 
A)  the government's budget was balanced. 
B)  profits from investing in Mexico were low. 
C)  an outbreak of renewed inflation was not generally expected. 
D)  the government's willingness to raise interest rates was not in question.

Question 5

If the U.S. dollar was defined as equal to 1/10 troy ounce of gold, and the French franc was defined as equal to 1/20 troy ounce of gold, then the franc price of a dollar would be

Accepted Answer

A)  2.00. 
B)  .10. 
C)  .05. 
D)  .50. 
A)  2.00. 
B)  .10. 
C)  .05. 
D)  .50.

Question 6

Each of the following is a strategy undertaken by western European countries that were part of the European Exchange Rate Mechanism in response to the 1992 speculative attack on their currencies except

Accepted Answer

A)  trying to avoid the consequences of the shift in expectations by spending currency reserves to keep their currencies from depreciating. 
B)  trying to demonstrate that they would defend the fixed exchange rate no matter how high the interest rate required. 
C)  instituting restrictions on currency trading. 
D)  abandoning their parity against the German mark and letting their currencies float. 
A)  trying to avoid the consequences of the shift in expectations by spending currency reserves to keep their currencies from depreciating. 
B)  trying to demonstrate that they would defend the fixed exchange rate no matter how high the interest rate required. 
C)  instituting restrictions on currency trading. 
D)  abandoning their parity against the German mark and letting their currencies float.

Question 7

The international gold standard was suspended when

Accepted Answer

A)  the Boer War began. 
B)  the Russian Revolution occurred. 
C)  World War I began. 
D)  the Federal Reserve was created. 
A)  the Boer War began. 
B)  the Russian Revolution occurred. 
C)  World War I began. 
D)  the Federal Reserve was created.

Question 8

Under a fixed exchange rate system with a high degree of capital mobility, a decrease in foreign exchange speculators' view of the long-run fundamental value of the exchange rate

Accepted Answer

A)  requires an immediate increase in domestic interest rates of / 
B)  requires an immediate decrease in domestic interest rates of /. 
C)  requires an immediate decrease in domestic interest rates of / 
D)  requires an immediate increase in domestic interest rates of /. 
A)  requires an immediate increase in domestic interest rates of / 
B)  requires an immediate decrease in domestic interest rates of /. 
C)  requires an immediate decrease in domestic interest rates of / 
D)  requires an immediate increase in domestic interest rates of /.

Question 9

Borrowing in foreign currencies

Accepted Answer

A)  hurts a country with a depreciating currency because it means that the real cost of the loans increases as the domestic currency depreciates. 
B)  hurts a country with an appreciating currency because it means that the real cost of the loans increases as the domestic currency appreciates. 
C)  helps a country with a depreciating currency because it means that the real cost of the loans decreases as the domestic currency depreciates. 
D)  helps a country with an appreciating currency because it means that the real cost of the loans increases as the domestic currency appreciates. 
A)  hurts a country with a depreciating currency because it means that the real cost of the loans increases as the domestic currency depreciates. 
B)  hurts a country with an appreciating currency because it means that the real cost of the loans increases as the domestic currency appreciates. 
C)  helps a country with a depreciating currency because it means that the real cost of the loans decreases as the domestic currency depreciates. 
D)  helps a country with an appreciating currency because it means that the real cost of the loans increases as the domestic currency appreciates.

Question 10

Under a fixed exchange rate system with a high degree of capital mobility, the exchange rate is determined by the following formula

Accepted Answer

A)      (r - rf). 
B)     (r - rf). 
C)      
D)     
A)      (r - rf). 
B)     (r - rf). 
C)      
D)

Question 11

During the 1930s, those counties

Accepted Answer

A)  that abandoned the gold standard early in the Depression fared much worse than those that clung to gold. 
B)  that clung to their gold parities found themselves forced to lower interest rates and expand their money supplies in order to avoid large gold losses. 
C)  that clung to their gold parities found themselves forced to lower interest rates and expand their money supplies in order to avoid large gold surpluses. 
D)  that abandoned the gold standard and floated their exchange rates were able to avoid deflation. 
A)  that abandoned the gold standard early in the Depression fared much worse than those that clung to gold. 
B)  that clung to their gold parities found themselves forced to lower interest rates and expand their money supplies in order to avoid large gold losses. 
C)  that clung to their gold parities found themselves forced to lower interest rates and expand their money supplies in order to avoid large gold surpluses. 
D)  that abandoned the gold standard and floated their exchange rates were able to avoid deflation.

Question 12

Under a gold standard, if a country's

Accepted Answer

A)  net exports plus net investment from abroad are less than zero, its Treasury will find itself losing gold. 
B)  net exports plus net investment from abroad are less than zero, its Treasury will find itself gaining gold. 
C)  net exports minus net investment from abroad are less than zero, its Treasury will find itself losing gold. 
D)  net exports minus net investment from abroad are less than zero, its Treasury will find itself losing gold 
A)  net exports plus net investment from abroad are less than zero, its Treasury will find itself losing gold. 
B)  net exports plus net investment from abroad are less than zero, its Treasury will find itself gaining gold. 
C)  net exports minus net investment from abroad are less than zero, its Treasury will find itself losing gold. 
D)  net exports minus net investment from abroad are less than zero, its Treasury will find itself losing gold

Question 13

To help solve the overvalued dollar problem of the late 1960s, policy makers in the United States wanted to

Accepted Answer

A)  lower interest rates to expand the U.S. economy. 
B)  devalue the dollar to increase exports and decrease imports. 
C)  raise interest rates to encourage foreigners to invest in the United States. 
D)  raise tariffs to discourage imports. 
A)  lower interest rates to expand the U.S. economy. 
B)  devalue the dollar to increase exports and decrease imports. 
C)  raise interest rates to encourage foreigners to invest in the United States. 
D)  raise tariffs to discourage imports.

Question 14

Each of the following is something that a country can do to reduce its vulnerability to foreign exchange crisis except

Accepted Answer

A)  strongly discourage - tax - borrowers from borrowing in foreign currencies. 
B)  be sure that your exchange rate can float without causing trouble for the domestic economy. 
C)  recognize that an important part of keeping it fixed are controls over capital movements. 
D)  recognize that an important part of keeping it fixed is the free flow of capital. 
A)  strongly discourage - tax - borrowers from borrowing in foreign currencies. 
B)  be sure that your exchange rate can float without causing trouble for the domestic economy. 
C)  recognize that an important part of keeping it fixed are controls over capital movements. 
D)  recognize that an important part of keeping it fixed is the free flow of capital.

Question 15

One of the reasons that collapses of currencies occur is

Accepted Answer

A)  in situations of limited capital mobility, countries with undervalued exchange rates and large inflation- financed budget deficits suffer speculative attacks. 
B)  in situations of limited capital mobility, governments with overvalued exchange rates and large budget surpluses suffer speculative attacks. 
C)  in cases like western Europe in 1992 currencies had suffered speculative attacks when speculators judged that the policies needed to maintain floating exchange rates had become inconsistent with the government's political survival. 
D)  in situations of limited capital mobility, countries with overvalued exchange rates and large inflation-. financed budget deficits suffer speculative attacks. 
A)  in situations of limited capital mobility, countries with undervalued exchange rates and large inflation- financed budget deficits suffer speculative attacks. 
B)  in situations of limited capital mobility, governments with overvalued exchange rates and large budget surpluses suffer speculative attacks. 
C)  in cases like western Europe in 1992 currencies had suffered speculative attacks when speculators judged that the policies needed to maintain floating exchange rates had become inconsistent with the government's political survival. 
D)  in situations of limited capital mobility, countries with overvalued exchange rates and large inflation-. financed budget deficits suffer speculative attacks.

Question 16

Each of the following is a possible reason why the gold standard in operation at the time of the Great Depression was a much less secure monetary system than the previous gold standard except

Accepted Answer

A)  everyone knew that governments could abandon their gold parities in an emergency. 
B)  everyone knew that governments had taken on the additional responsibility of trying to keep interest . rates low enough to produce full employment. 
C)  countries after World War I held their reserves in foreign currencies instead of in gold. 
D)  the post-World War I surplus economies, Russia and Germany, did not lower their interest rates as gold flowed in. 
A)  everyone knew that governments could abandon their gold parities in an emergency. 
B)  everyone knew that governments had taken on the additional responsibility of trying to keep interest . rates low enough to produce full employment. 
C)  countries after World War I held their reserves in foreign currencies instead of in gold. 
D)  the post-World War I surplus economies, Russia and Germany, did not lower their interest rates as gold flowed in.

During the 1930s, those counties

The Bretton Woods system broke down in the early 1970s because of

Under a fixed exchange rate system with a low degree of capital mobility, the domestic interest rate is determined by the following formula

Mexico's peso crisis in 1994-95 was a surprise for each of the following reasons except

If the U.S. dollar was defined as equal to 1/10 troy ounce of gold, and the French franc was defined as equal to 1/20 troy ounce of gold, then the franc price of a dollar would be

Each of the following is a strategy undertaken by western European countries that were part of the European Exchange Rate Mechanism in response to the 1992 speculative attack on their currencies except

The international gold standard was suspended when

Under a fixed exchange rate system with a high degree of capital mobility, a decrease in foreign exchange speculators' view of the long-run fundamental value of the exchange rate

Borrowing in foreign currencies

Under a fixed exchange rate system with a high degree of capital mobility, the exchange rate is determined by the following formula

During the 1930s, those counties

Under a gold standard, if a country's

To help solve the overvalued dollar problem of the late 1960s, policy makers in the United States wanted to

Each of the following is something that a country can do to reduce its vulnerability to foreign exchange crisis except

One of the reasons that collapses of currencies occur is

Each of the following is a possible reason why the gold standard in operation at the time of the Great Depression was a much less secure monetary system than the previous gold standard except

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Exam 15: International Economic Policy

During the 1930s, those counties

The Bretton Woods system broke down in the early 1970s because of

Under a fixed exchange rate system with a low degree of capital mobility, the domestic interest rate is determined by the following formula

Mexico's peso crisis in 1994-95 was a surprise for each of the following reasons except

If the U.S. dollar was defined as equal to 1/10 troy ounce of gold, and the French franc was defined as equal to 1/20 troy ounce of gold, then the franc price of a dollar would be

Each of the following is a strategy undertaken by western European countries that were part of the European Exchange Rate Mechanism in response to the 1992 speculative attack on their currencies except

The international gold standard was suspended when

Under a fixed exchange rate system with a high degree of capital mobility, a decrease in foreign exchange speculators' view of the long-run fundamental value of the exchange rate

Borrowing in foreign currencies

Under a fixed exchange rate system with a high degree of capital mobility, the exchange rate is determined by the following formula

During the 1930s, those counties

Under a gold standard, if a country's

To help solve the overvalued dollar problem of the late 1960s, policy makers in the United States wanted to

Each of the following is something that a country can do to reduce its vulnerability to foreign exchange crisis except

One of the reasons that collapses of currencies occur is

Each of the following is a possible reason why the gold standard in operation at the time of the Great Depression was a much less secure monetary system than the previous gold standard except

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

Investment, Net Exports, and Interest Rates: The Is Curve

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters